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Updated on
February 20, 2008,
D.J.
asks from
Crown Point, IN
on
February 17, 2008

Need Help with Tax Question for Providing Child Care.

Do I have to claim the money I get for babysitting on my taxes? I have never had to do this before and I have a parent who wants my ss# for her taxes. Is this something I have to do? How does it effect me if she claims child care on her taxes? Someone had said if you make over a certain amount then you have to claim the money you make on your taxes. I'm not quite sure how this works and every time I call someone for help I receive different answers. Thanks in advance!

Featured Answers

L.M.
answers from
Chicago
on
February 19, 2008

Leagally you should be reporting all of you income. If the person uses you SS# you most diffenatly have to report it if you don't then you could be audited and pay penatlies and fees. The person that you providing the care for will use this as deduction on their taxes.

I can answer this from a licensed day care provider viewpoint only. I must claim my income. Each year, I give each parent a printout of all of their payments along with my ssn for their filing of taxes. Know if they claim you and you fail to claim income, this sends a red flag up to the IRS. If you are providing care for more than one family, I believe that you can no longer claim "License Exempt" and are now operating a daycare without a licensed and can be charged with a crime. To find out the exact guidelines, I recommend contacting DCFS in Glen Ellyn at ###-###-####. Ask to speak with Debbie McElvy, she is the local rep and is very helpful. The response below mine suggests that the state collects/charges some type of fee to daycares. I've been doing this for almost 16 years and have NEVER paid any type of fee to anyone!

Technically, yes, you are supposed to claim the income. I watch a couple of kids as well, and i set the rules before hand that I didn't plan to claim the $, so it was agreed upon beforehand. since I don't make much money at all at this, I may not be required to anyway, but i wanted to set the ground rules. Parents who work get a nice tax break if they show they've paid a sitter, so it is nice for them to claim it. I've been on both sides of this coin!

More Answers

C.O.
answers from
Chicago
on
February 18, 2008

If you make over $600.00 a year you need to pay taxes. This is the law not a choice. My daughter makes mim. wage and she pays taxes. Just because you are self employed does not excuse you from paying taxes. I also run a family daycare and would never think about not paying taxes. Just because we are in a lower paying profession does not excuse us from paying our share of taxes. We use the schools, roads, military etc.. just like everyone else. It always bothers me how some people think they can choose if they would like to follow the law or not. I am not meaning this is you. I am responding to some of the other responses. I think it is great that you are trying to get the right information. Google Red Leaf Press and they should have some resources to help you out. I also believe you may be able to find a tax person through them but I am not sure. My husband has extra taxes taken out of his check every week so we are not hit with a big tax bill at the end of every year. There are alot of things you can write off such as toys, food etc. but you will need to keep receipts and record of the meals you feed the daycare children.

If they are going to put your ss# on their tax return, then you will definitely have to claim it as income, because the IRS will link the number & try to match it, and probably one or both of you would get notices from the IRS that it's not matching. I believe, technically, that you are always SUPPOSED to claim all of your income. The limit of $600 for the year comes in from a business paying it out - if a business pays out $600 or more to an independent contractor, then they are required to send out a 1099 form at year-end. Again, IRS will do matching. Under $600 they don't HAVE to send out the form, but some do anyway. Person should still technically claim the income either way. - Hope this helps!

Without question, yes you have to claim babysitting on your taxes (by law you must claim all income regardless of how much you make); yes you must provide your SS# to the taxpayer in which you babysit for; and yes it will effect you if she claims child care on her taxes and you do not claim that income. For your tax return, you can either claim that income under your own SS# (and then you will be taxed on that income accordingly) or you can apply for a personal tax ID # (simple, free and safer than handing out your SS#) and file and additional tax form for a small business. If you do this you have the ability to write off certain expenses which would then lower your actual income, thus lowering your taxes owed. I would highly recommed you have an accountant (one who is a CPA) do your taxes as they will be able to guide you in which way offers you the least amount of tax owed. I work for a guy who is really good at what he does (he is both a CPA and a Certified Financial Planner) and he is really reasonably priced. He is located in Orland Park but if that is not convenient he does phone consultations and then you can either fax or mail him all your information. He will file electronically for you, you can pay by credit card and then he will mail everything back (very convenient but if you choose not to use him definately use someone). If you wish to contact my boss his name is Telly Makris and he can be reached at ###-###-#### (he owns an accounting company and a wealth management company). Tell him I refered you and he will give you a discount on any work that he does. Thanks and Good Luck! Lynn F.

Hello D.,
I see that you have received alot of helpful info. I am a licensed childcare provider, and just thought I would foward this information to you. It is best to discuss all financial matters before hand. Unless you have a written agreement that you will not be giving out your tax i.d/ss# you technically owe that information. By law if you are collecting money it is your responsibility to report that to the I.R.S. I am not sure what accountant would tell a provider not to claim such information, for tax reasons that person is at great risk for audits & fees regardless of the dollar amount on tuition fees. My fees are solely based on my care including tuition, food, activities, field trips etc. I network with a lot of providers, and one provider withheld her information because a parent walked out without a two week notice/payment. From what I understand the family called IRS and put in a complaint stating that the provider withheld the information... long story short they were able to obtain a tax i.d. So please be careful. Good luck in this matter. I hope that it is resolved quickly!

you say you are a childcare provider? are you licensed?
did the mom when she hired you understood it was a cash job?
do you know how much you made off of her last year? do you have a EIN #? If you need more answer please e-mail me personally. ____@____.com

Yes, you have to provide her with that information. If you haven't already, you should apply for a EIN# Employee Identification Number from the internal revenues office, opposed to giving out your ss#. They are paying for you for a service and they have every right to be able to write it off on their taxes, just like you have to right to claim everything or almost everything that you buy for your daycare -- food, learning items, a part of your utilities, rent etc.. you have to find the right tax preparer.

The 1st thing you should do is talk to an accountant. If you claim your income, you can also take deductions for using your home for your business. There are rules and regs for what can and cannot be done and your accountant can fill you in on those specifics. The other thing you may need to look at is charging more. If you claim it as income, you then also have to pay income taxes. Your cost of providing them care has just gone up. Also, in keeping records and paying an accountant, your personal costs have gone up. Again, an accountant can fill you in on the percentages and requirements. Staying at home with your children is your priority as it should be! Bringing in some income to assist yor family is great, but make sure it doesn't loose you money in the long run!!! Have a great week! Love those babies and keep smiling!

If you give her your SS #, you will have to claim the same amount on your taxes. Which means you will have to pay taxes. I watched a little boy and let them claim me. My tax guy said that you can do it for a year or two without having to pay self-employment taxes (which you don't want, it's like an additional $4000.00 tax) If you continue to let someone claim you, make sure you keep reciepts for groc. or anything related to childcare, so you can have some deductions to help offset the 4000.00 tax. You can let them claim you this year, just put the amount under "other income" and list as "babysitting", you will have to pay taxes based on your tax bracket that you and your husband are in, but you shouldn't have to pay the self-employment tax this year. If you give someone your ss# and let them claim you AND you don't claim the money, you could get fined from the irs, if you get caught.

I can answer this from a licensed day care provider viewpoint only. I must claim my income. Each year, I give each parent a printout of all of their payments along with my ssn for their filing of taxes. Know if they claim you and you fail to claim income, this sends a red flag up to the IRS. If you are providing care for more than one family, I believe that you can no longer claim "License Exempt" and are now operating a daycare without a licensed and can be charged with a crime. To find out the exact guidelines, I recommend contacting DCFS in Glen Ellyn at ###-###-####. Ask to speak with Debbie McElvy, she is the local rep and is very helpful. The response below mine suggests that the state collects/charges some type of fee to daycares. I've been doing this for almost 16 years and have NEVER paid any type of fee to anyone!

you should definatley be claiming your income for your own sake. if a parent reports it and you don't you will be the one that gets in trouble. you will then also owe the irs a fee on top of your taxes. but instead of giving out your ss # your accountant can file a form and get you a tax id # so you can give that out instead of your ss #.
parents get a tax credit for what they spend on child care, but there is a cap (i don't remember what the # is)so maybe you could come to an agreement that she only claims that # and then you can too...and then that way you could still use your expenses as a write off. you really need to talk to an accountant.
Good Luck!

well as a teenager, I think it's understood you wouldn't try to have a baby sitter pay taxes. If you're older, then they should have been upfront with you about wanting you to pay taxes. Before you give her you ss#, I'd ask her for raise given you now have to figure in paying taxes on what they pay you since that was not agreed upon. A friend of mine in NY was a nanny for 2 lawyers (well parents who were both lawyers) and she did have to pay taxes with them. It's a full-time job.

The family who is requesting your info may have a plan at work where they can use untaxed money to pay for childcare. They need to have your info to be able to get reimbursed for the amount spent, but usually you would have been signing a form every quarter if this is the case. If they are just wanting to use it on the income tax form, I would explain that your rates are based on not having to pay taxes and that you would have to charge more if you needed to start paying taxes. If they indeed do put you down as the child care provider, you do need to show that income. However, there are many deductions you can use for your own taxes. It takes some time to fill out but expenses for taking the kids places, supplies (crafts, toys etc.)computer, even depreciation of your furniture, are all deductions. I don't remember the max you can earn without paying taxes so you'll need to call your local IRS office or tax person. I have had a home daycare in the past and always filled out tax forms because the deductions always lowered our taxes. However I now work as a nanny and pay my own estimated taxes every quarter. I recently had a mom who I babysat a few times for (1 week in the summer and an occasional day off school) who handed me a W2. I will be telling her that I will be charging a lot more if she expects me to pay taxes. Use the "business use of your home" form to see the deductions available to you.

Technically, yes, you are supposed to claim the income. I watch a couple of kids as well, and i set the rules before hand that I didn't plan to claim the $, so it was agreed upon beforehand. since I don't make much money at all at this, I may not be required to anyway, but i wanted to set the ground rules. Parents who work get a nice tax break if they show they've paid a sitter, so it is nice for them to claim it. I've been on both sides of this coin!

While I don't know specifically about doing child care, I have been part-time self-employed for the past 7 years. Part of the time I was actually working as a secretary for a small business but they didn't designate me as an employee so I worked as an "independent contractor." Now I work for myself as a wedding apparel designer and seamstress. What I would recommend is that you file as a self-employed person doing child care, and go ahead and pay the taxes on it. It's usually 15% of what you made. (If you're not sure how much you made, either just estimate it or ask the parent of the children how much they're claiming they paid you, just in case the IRS compares your files.) Generally even if it hurts a little to pay the taxes now, it's much better than having the IRS come to you later and having to pay back taxes and late fees.

According to the IRS, I think you have to declare all income that's not a gift, but I think a lot of nannies and babysitters don't.

I think you need to discuss it with the parents. They may be fine with it, or they may not realize that it's not that much money anyway. I think the maximum we can get out of it is $600/kid/year, for expenses capped at $4800/kid, when our real daycare costs are twice that. And if our DCP didn't want to declare her income it would make no difference because our preschool (kid 2) and summer camp/after school (kid 1) add up to the $4800 each anyway.

Anyway, I don't think it's outrageous of them to ask - I've never not been able to provide a tax ID for a home daycare, so I would expect it unless someone told me otherwise. On the other hand, they may not realize that the low prices they are getting are based on you not paying the additional taxes and might be fine with it once you explain it.

Either way, I highly recommend budgeting for a tax preparer - my husband is self-employed (he pays taxes on all of it and his 15% SS tax) and it would be such a pain if we didn't have our tax preparer to do all of the paperwork.

Yes, if you earn more than $1800 per year, you are liable for taxes (state, federal, social security, medicare etc.). If you are not a household employee of someone else, then as a selfemployed person, you are liable for the employee and employer side of social security and medicare. you can go to the irs website to figure this out but using an accountant is likely easier, though it will cost you probably around $400-$500.

Go to the IRS.gov website and look up childcare. They have instruction booklets that explain who needs to pay taxes. Watching the children in your home may place you in a business category with more implications. How much you earn may be a factor. You also have liability for the children you are caring for. You need to educate yourself on these things or you could have significant problems.

My first babysitter didn't claim her earnings. When it came time for taxes, I asked her for her SS# and she pretty much told me that she doesn't claim her earnings and, therefore, could keep her rates low. I think it would affect you because once she provides your name and SS# then, I would think, the State would start looking for your end. If they don't find your information being filed, they might then come after you. You know how they like to get money. As I understand it once you start claiming your earnings then you have to pay taxes and have to keep your home up to par and cannot take more children then the State will allow you to take (depending on the size of your house). We ended up not claiming the funds that we paid for childcare and were okay with it. Once the State gets involved fees come into play. Once extra fees come into play then you would have to start charging more so you can cover those extra fees. Discuss it with the mom and if she insists on getting your SS#, and you truly don't want to claim your earnings, then she will have to look for daycare elsewhere. It's a tough decision to make because one truly falls in love with the children but you have to look out for yourself and your family first.

If she is claiming the amounts she has paid you on her taxes then you need to claim that income on your taxes. If you were ever to be audited you would owe back taxes on any income you did not claim. This is if you make more then a certain amount per year. I think that amount is $500, but an accountant would be able to confirm that for you.

If she plans to claim the childcare tax credit/deduction/whatever it's called, then, yes, you will be subject to paying taxes on that income. How much you are taxed will depend on your overall income, but she cannot claim the childcare expenses if she doesn't have your social security number. It is the same with employers who have a cafeteria plan for childcare expenses. The provider must have either a SSN or Tax ID# in order for the parent to claim the expenses.

I went to school for this in what seems to be a former life. While tax rules change on a year to year basis, I can tell you this: Once you give up that SS#, you need to claim whatever that person claims. Best thing to do is say that you prefer not to give it out. The other people get a tax break & you get stuck claiming it as extra income (which would therefore be taxed!). As far as a minimum amount, at one time it was $800 per year, but that may have changed as well. I recommend you talking it over with the parents - and if they insist on claiming it, then you may need to adjust your price in the future!

Please tell me what "sahm" means. I see that so often on mamascource. Yes, if she claims it, it must be enough to be taxable to her even if it isn't enough for you. If it's not enough, you won't be taxed on the amount but it surely isn't worth government problems.

you should talk to a reliable tax preparer. Some parents, depending on where they work, have the child care accounts..similar to medical spending accounts. they need to turn in your info/with your signature so that they can get the money out of the child care account. you would definitely have to declare these wages. if you don't want to hire someone for your taxes, you might be able to get some answers at wcc. they usually have people helping to prepare taxes.
hope this helps a little.

D.
I daycare form home and my tax guy tells me not to claim it. It will shoot me into another tax bracket. I would discuss this with my accountant I DO NOT give out my S.# to any of my people I day care for. They know that up front, I do not charge them enough for them to claim me. If you are charging them only 100-150 a week I would tell them that you do not give out that info at all period. None of my people have ever claimed me or given me a hard time about it. I figure if they want the write off for taxes them let them go to a daycare where they pay full price, which for a newborn can be $225.00 and up per week. I figure I am saving them a lot of money. Talk to your accountant.. Good Luck

Yes, you should be claiming the money that you receive. If you are a registered daycare provider, and you don't claim the income, it will increase your chances of an audit. The good thing about claiming your income is that you can also deduct things to offset your income. I would talk to your tax person about your alternatives.
In order for the parent to claim the expense on their tax return, they need your SSN or your tax id (if you have set up a business).

Technically, any money you make is basically taxable. This parent that wants your social security number has to have it in order to fill out the child care form for a child care deduction....this is the IRS' way to double check to make sure you are claiming the income they are asking for a credit for.....clever aren't they?? The best news is that there are also deductions you are entitled to that would reduce the income tax you have to pay on that income. If you have your taxes done by a professional tax preparer, they can help you with this issue. I am almost finished with my tax certification course and have done taxes for H&R Block in the past...if you have more questions let me know. You can email me at ____@____.com I can give you tax planning strategies.

This is really something you should have discussed with them before hand....they probably have a daycare spending account where they get reimbursed the money they pay you from their paycheck pretax. They should have mentioned it before now though cause there is usually documentation that goes along with it. That or they are just wanting to claim childcare as a deduction on their taxes.

If this is your main source of income and you are making a decent amount off of it (ie it is regular income) you really should be claiming it....just as you can also write off expenses involved with the daycare you provide. I used to have an at home provider who didn't claim her income...except what we paid her cause she had to because we were writing it off. It just drove me nuts that she had all that money coming in and wasn't claiming it. If one of your parents claims it, at the very least you need to claim it too. And as a previous poster stated, if you made over 600 from an individual employer (parent) you should really be claiming that too.

Yes, you should be paying taxes, but the person you are working for should also be paying social security for you. I don't think she can claim you as an expense on her taxes unless she was paying your SS...wish I knew more. The important thing for you and your kids future is that you DO pay taxes and social security b/c you need to pay taxes to show income (when you want to buy, get credit, etc) and you need to pay into social security so that when you retire you'll have that safety net.

I have been a family childcare provider for 13 years. As such, I am well acquainted with taxes and this line of work. Yes, you do have to claim money you earn from babysitting as income. It is taxable. The parent rightfully wants your social security number so that she can claim a child care credit on her taxes. Legally you are required to provide this information. Even if you don't, my guess is that this could come spell problems for you with the IRS down the road. My accountant, Mike Politiowicz (____@____.com) has always offered a free half hour consulation regarding taxes and our line of work. I know its a shock to find that you owe taxes, but on the upside, there are also some tax breaks for using your home as your place of business.
If you would prefer to find someone else, go to Redlealpress.org and find someone through them. This is Tom Copeland's organization, and he knows more about taxes and childcare than anyone in the country. As far as I'm concerned, he's the final word on this subject, since as you say, you do hear lots of conflicting information. Mike was trained at the by the Red Leaf organization. Good luck, and go legal!
K.

Yes, you are suppose to claim any self-employed income on your taxes. You will be taxed if you make over $600 that year. The people using your services do have a right to report the money they paid you as it is deductable for them.

Your best bet is to claim the income as it could come back to bite you when the parent reports the money paid and the government shows no record of you ever reporting the income.

Leagally you should be reporting all of you income. If the person uses you SS# you most diffenatly have to report it if you don't then you could be audited and pay penatlies and fees. The person that you providing the care for will use this as deduction on their taxes.

You are supposed to claim it but you don't have to as long as the people you are babysitting for understand then that they cannot claim the childcare. It is really not that much of a credit back and since in home childcare is cheaper it is even less

I pay my sitter but I don't claim the childcare because then she would also have to file and end up owing the feds. You would have to discuss it with the person but I would not give out your social